Homebuyers seem to be in a rush right now.
Interest rates have been rising for the past few months. They actually increased a lot recently, with average 30-year fixed mortgage rates topping 4% for the first time since 2019.
Dr. Lawrence Yun, chief economist at the National Association of Realtors, expects them to hover around 4% for most of the year.
Because of this, there’s a lot of panic buying to “beat the rates” before they increase again.
While interest rates are an important factor in the decision to buy a home, they are not the ONLY factor.
Here’s the truth most people aren’t thinking about: interest rates are historically low right now, but even if they continue to increase, they will STILL be historically low.
Panic buying because interest rates are low is based on the false belief that lower interest rates = more savings.
Yes, this is true sometimes, but it’s not true all the time.
Why?
Because historically there has been an inverse relationship between interest rates and home prices.
“Low interest rates tend to increase demand for property, driving up prices,” according to Barry Nielsen, Investopedia. “High interest rates generally do the opposite.”
So as interest rates increase, demand for property decreases and home prices decrease.
Not immediately, and not always–there are factors like inflation, but generally speaking, these are the trends.
And experts predict that current market conditions will remain for the near future.
“The housing market will continue to remain competitive due to low existing inventory,” according to Sam Khater, Chief Economist, Freddie Mac.
Nadia Evangelou, The National Association of Realtors Senior Economist and Director of Forecasting, predicts that, “As homebuying activity typically increases in the spring with its peak in June, the housing market will continue to outperform compared to pre-pandemic. NAR expects home sales to be 10% higher in the next 6 months compared to the same period in 2019.”
Therefore, while buying a home to “beat the rate increase” might save you money on interest, you could actually end up paying MORE for a home.
And what’s even worse:
When these major purchasing decisions are made quickly and emotionally, the buyers that focus only on one part of the equation and not the big picture run the risk of getting into the wrong home, and then having to sell it and buy another home within the next few years
This leads to tens of thousands in transaction costs.
These buyers may end up paying more to get OUT of their home than they “saved” getting INTO it. Don’t be that buyer.
Not to mention there are also a few benefits associated with higher interest rates.
(Yes, you read that right.)
Higher interest rates are a sign of a good economy.
Of course, nobody wants them too high, but interest rates that are than we have right now means our economy is doing well.
Higher interest rates generally lead to lower home prices, or at the very least a cooling of pricing increases.
Plus, higher interest rates mean you’ll be able to write off more at tax time.
So if you’ve been tempted to buy a home just because you hear you have to rush to beat the rates, my advice is to take a deep breath. Look at the big picture. And consider this:
Other than interest rates, is it the right time for you to move? Why or why not?
Regardless of what interest rates are doing, regardless of what the market is doing, if right now is a good time for you or anyone you know) to buy or sell, I’d love to help. I have programs in place that make buying and selling easier.
Buying? I can help you find the right house for your life now, utilizing both MLS listings and my off-market knowledge. I have the tools and resources to write strong offers in a competitive environment.
Selling? I can help you get your home ready to hit the market. From freshening up to staging, I have resources who can help you get your home in tip-top shape so you can sell it for the most money possible. And I can recommend home organizers and movers who can help you eliminate clutter, pack up, and move on to your next dream house.
Want to buy but also have a house to sell? I work with lenders who can help you buy your next home first, before your current home is sold and then sell your current home for maximum profit.
Contact me to book a spot on my calendar so we can chat about how I can help.
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